Closed innovation, which was dominant in the 20th century, is based on having internal R&D as the major defence line against rivals who had to ante up considerable resources to get in the competition. In the last decade, tycoons of the past have been encountering a remarkably disruptive competition from start-ups with negligible R&D budgets and alternative innovation models. Moreover, knowledge spillovers powered by the internet, globalization, as well as, the shortening innovation cycles have redirected leading firms’ priorities from fierce know-how protection to rapid know-how development. This paradigm shift gave birth to the open innovation model.
An illustrative example for this shift could be the case of Lucent Technologies and Cisco which used to compete with totally different innovation models. Lucent was devoting enormous resources to researching state-of-the-art components and systems in pursuit of fundamental discoveries while Cisco was acquiring the technologies needed from the market, usually by partnering or investing in promising start-ups. Over time, Cisco kept up with the R&D output of, perhaps, the world’s finest industrial R&D organization and acquired a portion of its market share without conducting much research of its own.
Since winning in today’s market has become a matter of speed of development and commercialization, co-sharing resources and knowledge with start-ups, in pursuit of win-win synergies, has become a mainstream. Large companies want to partner with the passionate small firms to access game-changing technologies, while the small companies benefit from resources beyond their organic reach. Of course, cooperating with a start-up in an open innovation initiative is more appealing than cooperating with the same-scale businesses for rational reasons, such as having less strategic threat, as well as, enjoying more operational ease.
However, many of these partnerships struggle halfway and end up with low ROI due to differences in business cultures, attitudes about data sharing, risk averseness or operational mechanisms. Accordingly, any party engaging in an open innovation project shall consider these key preventive actions to raise the stakes of their joint venture success;
Make it a priority from the beginning to hold honest, open conversations with potential partners. It’s critical to not only share your objectives, but also your concerns, work styles and values. Assuming that your way of doing business is common sense or that you will get to know each other along the way is a gambling risk. If you feel that the other party is not equally transparent you shall reconsider such opportunity; knowing that the longer the term of engagement the more transparent the partners should be.
Instead of commencing with heavy commitments to large scale projects with far milestones, partners should start with a small project with less complexity and resources where both sides can get to test the chemistry between the teams and the prospects of such cooperation. Moreover, such demo project will help both partners in identifying possible areas of conflict to mitigate on the large scale.
Treating an open-innovation partnership as a rigid transactional relationship where cooperation is limited to fulfilling assignments and meeting in formal presentations, is a bad recipe. Instead, collaborators should engage in informal brainstorming, reveal their soft sides, build homogeneity and share responsibility. This aspect is highly significant when the large company’s R&D team is slightly intimidated or provoked by the reliance on external partners and holds some predispositions about the other side.
Besides the legal framework specifying rights and duties a manual is needed to govern the new relationship and facilitate quick responses to potential challenges. Projects can easily stall over an overlap in duties, wrong expectations or different communication preferences; which could be easily sorted out by investing some time in laying out a clear framework. Having a concrete guideline in place saves much time down the road and helps keep the focus on the creative process.
When you see co-workers who have been sharing the same office for years clashing in simple cooperative tasks, you shall wonder what the case with foreign teams engaging in a profound collaboration would be like. Even when you put all the organizational issues in order, lacking the essential collaboration and collective thinking skills can put down a multi-million project. Enrolling your team members in various training programs, especially the employees who are used to working in silos, is highly recommended. Also, keeping a collaboration consultant on board to coach and advise, decreases the possibility and severity of conflicts.